Walgreens Boots Alliance Inc (NASDAQ: WBA) results failed to meet expectations

Walgreens Boots Alliance Inc (NASDAQ: WBA) in the first quarter of 2017 reported adjusted earnings per share of $1.10 beating the analysts’ estimates of $1.09. However, in the 1Q FY 17, the company has reported the revenue of $28.5 billion, a fall of 1.8% and missed the analysts’ estimates of $29.37 billion. As a result, WBA stock closed on a negative note today and lost over 0.9% (as of 11:17 AM EST January 5th, 2017; Source: Google finance).

But, the profits grew due to the recent partnerships with pharmacy benefit managers (PBMs) like Express Scripts Holding Co, OptumRx, insurer United Healthcare and insurance companies that has helped boost sales of prescription drugs as well as non-drug items in the first quarter. The adjusted net earnings attributable to WBA for the first quarter FY 17 has increased 6.1% to $1.2 billion.

Walgreens Boots Alliance has raised the lower end of its adjusted profit forecast for the year ending August 2017 as it anticipates benefits from recent partnerships in the second half of FY 17.  Walgreens expects the FY 17 earnings per share in the range of $4.90 to $5.20, compared to the previous guidance for earnings per share of 4.85 to $5.20.

WBA is expecting to win more patients to its pharmacies from the new agreements with health-care companies. This includes a partnership with Prime Therapeutics, a pharmacy-benefits manager owned by Blue Cross and Blue Shield health plans, which makes WBA a preferred pharmacy where patients pay less to fill prescriptions. Moreover, it also replaced CVS Health as in-network pharmacy for Tricare, a health-care program for military personnel and their families.

Additionally, Walgreens Boots Alliance is awaiting regulatory approval for its $9.5 billion takeovers of smaller rival Rite Aid Corp and expects the deal to be closed early this year. The merger agreement was previously extended till January 27th. In addition, WBA and Rite Aid have entered into an agreement to sell 865 Rite Aid stores and certain assets related to store operations to Fred’s, Inc. for $950 million in an all-cash transaction. The deal will happen after the FTC approval, the approval and completion of the pending acquisition of Rite Aid by WBA and other customary closing conditions. Further, after the merger of the two companies, WBA expects that it will realize synergies from the acquisition in excess of $1 billion, within three to four years of closing of the merger.

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